Two Counties, Two Rulebooks: What Tennessee's Security Deposit Statute Actually Requires of Shelby and Fayette County Landlords
Security deposit disputes are the most avoidable loss in a rental operation. They are also the one place where Tennessee law does something unusual: it does not merely limit what you may deduct, it can strip your right to keep anything if the paperwork behind the deduction is wrong. And in the two counties Homefront works, that statute governs one of them and generally not the other.
The scope line most owners never check
Tennessee's Uniform Residential Landlord and Tenant Act — Tenn. Code Ann. Title 66, Chapter 28 — is not a statewide law. Section 66-28-102 applies the chapter only in counties with a population above 75,000 by federal census. That single line splits our service area in half.
Shelby County, Tennessee recorded 929,744 residents at the 2020 census, so it is comfortably covered. A rental in Memphis, Germantown, TN, Bartlett, Collierville, Cordova, Arlington or Lakeland in Shelby County is governed by everything below. Fayette County, Tennessee recorded 41,990 residents at the same census and is not covered. A rental in Somerville, Oakland in Fayette County, Rossville, Piperton or Moscow generally falls outside the chapter, where the written lease and general Tennessee contract law do the work instead.
Same owner, same lease template, two different rulebooks about thirty minutes apart on Highway 64. Treat what follows as general information rather than legal advice, and get a Tennessee attorney's read on your actual lease.
Two pieces of paperwork decide whether you keep a dollar
For a Shelby County rental, Section 66-28-301 sets two obligations that most owners underestimate.
First, the account. Every landlord requiring a security deposit must deposit it in an account used only for that purpose, at a bank or lending institution regulated by the state or a federal agency. Subsection (h) adds that you must tell the tenant, at lease signing, where that account is held — the institution, not the account number.
Second, the listing. Charges against a deposit rest on a comprehensive listing of the damage that is the basis for the charge, together with the estimated dollar cost of repairing each item. A lump-sum "cleaning and damages" line is not that.
Then comes the part that makes this a financial issue rather than a clerical one. Subsection (c): no landlord is entitled to retain any portion of a security deposit where the deposit was not held in the required account and the damage listing was not provided. Not the disputed items — the whole deposit. Commingling deposits with operating cash is the single most expensive shortcut available in a Shelby County rental.
"Tennessee does not cap what you can charge as a deposit. It caps what you are entitled to keep when the paperwork is wrong, and that cap is zero."
The inspection has choreography, and you start it
The tenant has a statutory right to inspect the premises to determine liability for physical damage. The sequence matters. On your request that the tenant vacate, or within five days of receiving written notice of their intent to vacate, you may give notice of the tenant's right to be present at the inspection. You may require that inspection to happen after they have completely vacated and surrendered all means of access — but it must occur on the day they vacate or within four calendar days after.
If the tenant schedules an inspection and then fails to attend, they waive the right to contest damages you find — but only if that waiver is set out in the rental agreement. That clause has to be in the lease before move-in, not discovered at move-out.
Where a mutual inspection happens, both parties compile and sign the listing, and those signatures are conclusive evidence of its accuracy. A tenant who refuses to sign must state in writing which items they dissent from, and a later court claim is limited to exactly those items. The inspection right falls away entirely if the tenant vacated without written notice, abandoned the unit, was judicially removed, never responded to your notice, or no-showed.
Two clocks run on every turn
Damage you find later is not automatically chargeable. Subsection (g) allows recovery of physical damage discovered after the inspection only if you discovered it before the earlier of two deadlines: 30 days after the tenant vacated or abandoned, or 7 days after a new tenant takes possession. On a fast turn — and fast turns are the point — the seven-day clock is the binding one. That argues for a complete damage walk before the next resident gets keys, not after.
The second clock runs the other way. If a tenant leaves owing nothing and a refund is due, you send notice of the refund amount to their last known or reasonably determinable address. If no response arrives within 60 days of that notification, you may remove the deposit from the account and retain it free of the tenant's claim. If they leave owing rent, the statute lets you apply the deposit to the debt directly.
In Fayette County, the lease is the whole rulebook
Outside the chapter, there is no statutory forfeiture waiting to catch you — and no statutory framework to lean on either. Deposit handling, inspection rights, itemization and timelines come from whatever your lease says, which means a thin lease is a genuine exposure in Somerville or Oakland in Fayette County. Our practice is to run the identical process on both sides of the county line: separate account, dated and photographed move-in condition report signed by the resident, and an itemized move-out listing with real repair estimates. National landlord guidance lands in the same place — a signed move-in and move-out checklist with timestamped photos is the standard advice for a reason.
The habits that end the argument before it starts
Photograph every room, fixture and appliance at move-in and have the resident sign the record. Hold deposits in a dedicated account and disclose the institution at signing. Require written notice of intent to vacate. Send the notice of the right to be present. Itemize with dollar estimates rather than categories. Distinguish ordinary wear from damage in writing, before it is contested. Build the turn schedule around the seven-day clock rather than against it.
None of that is exotic — it is the same discipline that keeps a turn from eating a quarter's cash flow, which we broke down in the real cost of tenant turnover in Memphis, and it is part of the operating baseline in our first-time Memphis landlord playbook. It is also why we underwrite and operate Memphis and Bartlett rentals on documented process rather than goodwill at move-out.
Want your deposit process pressure-tested?
Send us your lease and your current move-out packet and our team will tell you where the statute would land on it, and what a compliant turn looks like on your properties. Our management fee never exceeds 10% of monthly rent, with a customized schedule as your portfolio grows and no hidden charges. Tenant screening is paid by the applicant, and under the lease, residents are responsible for legal fees arising from a breach. Get a free rent analysis or call or text (901) 306-0484.
Sources & further reading: Tenn. Code Ann. § 66-28-301, Security deposits (2024), Tenn. Code Ann. § 66-28-102, Application — Preemption, U.S. Census Bureau QuickFacts: Shelby County, Tennessee, U.S. Census Bureau QuickFacts: Fayette County, Tennessee, BiggerPockets: The Ultimate Move-Out Checklist for Landlords. Statutory content is summarized as of August 2026 and may change; this article is general information, not legal, tax, or investment advice.